A factory benefits from discharging effluent, q, into a lake. The marginal benefit function is given by 60-2q. The pollution causes damages to two nearby communities. The marginal damages to Community A are 1q. The marginal damages to community B are 2q.
Now, two other factories start producing in the area and benefit from polluting, too. For each, the marginal benefit from pollution is given by 60-4q. What is the new socially optimal quantity of pollution?